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When is an agent a "commercial agent"?

Sometimes we have sympathy with the commercially-minded view that lawyers are a waste of money. The recent example of money apparently being wasted on legal fees is the Court of Appeal case of Sagal (trading as Bunz UK) -v- Atelier Bunz GmbH.

The case involved a UK sole trader in the jewellery business, who traded using part of the name of his German supplier, Atelier Bunz. Despite the fact that orders were separately received and invoiced by Bunz UK to customers, and by Bunz GmbH to Bunz UK, with each invoice being subject to the invoicing company’s terms and conditions, Mr Sagal claimed that he was in fact a commercial agent. As a commercial agent, he would have been entitled to compensation upon termination of any agency under the Commercial Agents Directive 86/653/EEC, implemented in the UK by the Commercial Agents (Council Directive) Regulations 1993. The basis of his claim was that he had authority to negotiate sale of jewellery on behalf of Bunz GmbH and that his prices, being a fixed mark-up from Bunz GmbH’s prices, meant that he had no discretion over pricing and in effect received a commission of a fixed percentage of Bunz GmbH’s prices.

Our subjective view that this claim was fruitless, and thus a waste of court and legal fees, is based upon the clear wording of regulation 2(1) of the 1993 Regulations, which defines a commercial agent as:

a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the “principal”) or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal.

We would have had great difficulty in matching the facts to this definition to believe there was merit in the claim. As the Court of Appeal subsequently found, as Mr Sagal did not have the authority to contract in the name of Bunz GmbH as well as on its behalf, he was not a commercial agent. He did not contract in the name of the principal and his retail prices were not in fact fixed by Bunz GmbH.

This case should be a warning to agents who work for undisclosed principals, a situation that it not uncommon under English law as it has certain VAT advantages. These agents will not, on the face of Regulation 2(1), be commercial agents.